CFPB May Not Be Independent After Court Ruling, Hensarling Says

A court decision to make the Consumer Financial Protection Bureau’s director report to the president means that the statutorily independent agency must follow executive orders, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) argued Wednesday.

The U.S. Court of Appeals for the D.C. Circuit’s recent decision means the CFPB “is not, and may no longer be considered to be, an independent regulatory agency,” Hensarling wrote in a Wednesday letter to CFPB Director Richard Cordray.

“Consequently, it is also clear that executive orders applicable to executive agencies apply in full to the CFPB,” Hensarling said.

On Oct. 11, the appeals court struck down elements of the CFPB’s current governance structure as unconstitutional. Under the 2010 Dodd-Frank Act, the CFPB was created as an independent agency. The president originally could only dismiss the agency’s director for cause. The court ruling lifted that limitation, saying it gave the director too much power.

Hensarling pointed to four executive orders that President Obama and former President Clinton signed that should now impact the CFPB’s rulemaking process in light of the decision. These orders require executive agencies to conduct cost-benefit analyses of new regulations and report on their consultations with state, local, and tribal governments.

Hensarling said the executive orders “represent modest attempts to ensure that executive agencies are accountable to the American people through the president they elect, and to prevent agencies from recklessly promulgating damaging rules by requiring that they conduct meaningful cost-benefit analyses and consult with affected parties, including states and Indian tribes.”

He requested Cordray’s assurance that the agency will comply with the executive orders by Oct. 26.

Hensarling has been one of the CFPB’s most vocal critics throughout its existence. He also is the champion of a bill, the Financial CHOICE Act, that would subject the agency to the congressional appropriations process and remove the director position in favor of a multi-member, non-partisan commission.

The CFPB didn’t immediately respond to a request for comment.

Amit Narang, a regulatory policy advocate at the consumer group Public Citizen, said the CFPB should push back on Hensarling’s request.

“The CFPB should reject Chairman Hensarling’s demand that the CFPB submit its rulemakings to [the Office of Information and Regulatory Affairs] for regulatory review,” Narang said in a statement. “Even if the decision were upheld, current law specifically identifies the CFPB as an independent agency that is excluded from the executive order requiring OIRA review. That law was not altered by the court’s opinion.”

Update: 4:21 p.m. This story has been updated to include a response from Public Citizen.